Archive for August, 2007
Give Yourself a Tax Break
August 26, 2007
Do you feel like your property taxes are too high? That sounds like it could be a bad thing - but maybe it isn’t! Maybe, your property taxes really are too high. Many people who have purchased (condos especially) in the last couple of years may really be paying too much in property taxes. If your property has dropped significantly in value, why not ask the Santa Cruz County Assessor’s office to re-appraise your house? They even have a handy form for it available on-line:
http://sccounty01.co.santa-cruz.ca.us/asr/forms/taxform10.pdf
Let’s say you paid $500,000 for a condo 18 months ago. If the value of that condo has dropped by 8%, that would mean it’s today worth just $460,000. Depending on the special assessments in the area where your property is located, this drop in price means that you are over-paying by between $400 and $500 per year. That’s not so much money that it’ll make-or-break you, but it could add up to thousands of dollars in savings over the years.
Technorati Tags: appraisal, assessor, tax
Posted by SantaCruzBroker at 11:12am
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July Market Update
August 13, 2007
Another edition of my newsletter, Santa Cruz Market Trends, has been sent out to the folks who subscribe to it by e-mail. How did July shape up? The answer, surprisingly to some, is - not too bad! The median price for single-family homes throughout all of Santa Cruz county rose 3% (0.6% year-over-year). The news isn’t quite so cheery for condos: the median price dropped 8.3%, however, this means the price is still up 7.1% from July a year ago.
The bad news for Realtors (and mortgage brokers, escrow people, appraisers, home inspectors, and the like!) is that the amount of sales volume is down from last month - 14.5% for single-family homes, and 3.4% from July a year ago. Condo sales are down dramatically - 19.4% from June of this year, and down 34.1% from a year ago.
Technorati Tags: sales data, market data, real estate sales
Posted by SantaCruzBroker at 4:11pm
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Time for a Mortgage Meltdown
August 10, 2007
I was at a pretty stressful signing yesterday. I’m in a deal where the buyers are taking out a pretty large pair of loans (totaling over $1 million). Last week when the mortgage industry kind of melted down, I called up the buyer’s lender to tell him to please proceed with all due haste, that we should get the deal closed ASAP. Everything was fine, he assured me - the buyer’s loans were totally OK, nothing to be worried about, we could close on schedule.
Well, it turns out, the loan broker was a bit optimistic - he had the buyers using National City Mortgage to do the second loan. It turns out that National City Mortgage is basically on the verge of collapse. Supposedly, National City would be funding loans where the loan documents are already written up - and in this case, the loan docs had been written up this past Tuesday. In theory, we were safe - except that the loan had to fund, no question, by this coming Monday. If not, the loan papers would have to be redrawn. The problem is, National City isn’t funding loans for newly drawn loan papers. Basically, we were told, the buyers needed to sign yesterday or there would be no second loan for them, and hence, no deal.
It kind of reminded me of the Savlador Dali painting about the melting clocks, for some reason:
It was a very stressful situation in the signing room. The buyers arrived a bit late for their 2 PM appointment. They were still signing loan documents past 4 PM (typically, a signing, even for two loans, takes about an hour - these buyers, though, exercised their right to actually read the loan papers!). There were questions about the loan documents, and some calls were made to the loan broker just after 4 PM. “YOU’RE STILL AT THE ESCROW COMPANY SIGNING PAPERS? THOSE DOCS HAVE TO BE AT FEDEX TODAY!” - I could hear the loan broker clearly through the tiny speaker of the cell phone, from all the way across the table.
The escrow officer was aware of that, but what can you do? You move along as quickly as possible, but you can’t afford to rush. If even one document fails to get signed, or an initial is missing, it could mean the loan doesn’t get funded. The FedEx delivery man came and went while we were still signing - he had his schedule to keep, after all. The escrow company would have to hand-deliver the loan package to the local FedEx office by 6 PM. Talk about down to the wire.
Did the loan docs make it to FedEx on time? I sure hope so! Will the loan fund, even if they did? I hope so, too! I trust the escrow officer and her company to get the docs to FedEx on time - I’ve done a lot of business with them, and they are very professional, competent people. I’m a bit more worried about National City Mortgage coming through with the money. The loan is supposed to fund on Monday - we’ll see what happens! As for me, I’m off to L.A. for the weekend with some friends. I’ll put this out of my mind, and trust that it will all work out come Monday. And if not, that’s OK, too. There may be other lenders out there, the buyers might be able to get a loan from a friend, who knows? Time will tell.
Technorati Tags: funding, loan, mortgage, signing
Posted by SantaCruzBroker at 8:20am
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Equity Sharing - Credit Crisis key?
August 06, 2007
In case you haven’t heard, there’s a crisis in the mortgage market. Probably by now, you’ve heard about the sub-prime lender implosion, but now, it’s no longer sub-prime lending that’s suffering. Now, prime mortgage lenders are also taking a big hit. Money is getting more expensive - even this week’s Economist magazine has a cover story about the credit squeeze.
So what’s a prospective home buyer to do? Well, the good news is, if you’ve got some cash for a nice-sized down payment, things aren’t too bad for you at the moment. But what if, like most people, you don’t have 10% of $700,000 lying around? In a situation like this, you may want to look into doing some equity sharing.
Equity sharing is where someone other person comes in and provides the down payment, and in exchange, they go on title to the property. There will be a separate contract between the everyone who goes on title as to what the plan will be. For example, in three years, the plan might be that the buyers re-finance the property, and buy out the equity share (plus accumulated equity, of course!). Or, the plan might be to sell the property, and the buyers, using the equity they have then built up, can use that as a down payment on another property.
Does this sound interesting to you? If so, the next question might be: where do you go and find an equity partner? Or what if you have some money, and are interested in becoming an equity partner? Thanks heaven for the Internet! It turns out, there are web sites that put buyers and equity partners together. Check these out:
http://www.homeequityshare.com
and
http://www.equitysharegroup.com
I have never used either of these web sites, so I don’t personally endorse their services - but if you think an equity share arrangement might be useful for you, you might want to check them out!
Technorati Tags: down payment, equity share, credit
Posted by SantaCruzBroker at 10:06pm
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The ol’ 1031 Five-Year Switcheroo
August 02, 2007
So here I am, working on doing my own person 1031 Exchange. I’ve done plenty of deals where either the buyer or the seller was doing a 1031 exchange, but I had never done one myself personally. I have a property where I’ve enjoyed quite a bit of appreciation since I bought it, but I wasn’t looking forward to paying the big fat capital gains tax. So, I planned on doing what any self-respecting person in my position would: I figured I would buy an investment property here in town, hold onto it for a year or two, and then move into it. The property would then become my primary residence, which I could sell two years after that, and keep all of the gain, tax free!
A brilliant idea - one that many people have had in the past. Too many people, as it turns out. I paid a trip to my brand new accountant today, and ran my idea by him. He poured a liberal dose of cold water on my scheme. It turns out that our fearless leaders in the U.S. Guv’mint plugged that little loophole, to wit:
Five (5) Year Holding Requirement for 121 Exclusion
Thanks to recent legislation (passed October 22, 2004), folks like myself will now have to hold the property for a total of five years from the date of purchase in order to qualify for the 121 Exclusion (whereby an owner can sell the property and keep any profits, tax free, up to $250,000 for an individual or $500,000 for a married couple).
Well, that’s not so bad, really. Actually, my new $230/hour accountant told me that I’d have to hold it for five years after I converted it to my primary residence, and he appears to be wrong about that. It’s something that I will want to double-check with him. But a five year hold time isn’t so terrible - I was thinking it would have had to be at least 3-4 years anyway. It’ll just mean I’ll have to wait out an extra year of value appreciation before I cash out. 
Technorati Tags: 1031, exchange, accounting, tax
Posted by SantaCruzBroker at 7:49pm
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